Remedies for Price Overcharges: The Deadweight Loss of Coupons and Discounts
AbstractThis article evaluates two different remedies for consumers who have been injured by a price overcharge on the sale of a good. Under a coupon remedy, injured consumers are awarded coupons that can be used for a limited period of time to purchase the good at a price below that which prevails after the overcharge has been eliminated, that is, below the competitive price. Under a discount remedy, any consumer, without proof of injury, may purchase the good for a limited period of time at a price that is set below the competitive price. Both remedies generally cause consumers to buy an excessive amount of the good during the remedy period. Under the coupon remedy only a subset of consumers are affected in this way (those holding a relatively high number of coupons), while under the discount remedy all consumers are affected. We show nonetheless that the resulting deadweight loss could be lower under the discount remedy. We also consider how the deadweight loss changes when the length of the remedy period is increased by extending the expiration date for the use of coupons or by employing a lower discount for a longer period of time. The deadweight loss may or may not decline under the coupon remedy, though it does decline under the discount remedy. In neither case, however, does it go to zero in the limit.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by American Law & Economics Association in its series American Law & Economics Association Annual Meetings with number 1060.
Date of creation:
Date of revision:
Other versions of this item:
- A. Mitchell Polinsky & Daniel L. Rubinfeld, 2004. "Remedies for Price Overcharges: The Deadweight Loss of Coupons and Discounts," Microeconomics 0401001, EconWPA.
- A. Mitchell Polinsky & Daniel L. Rubinfeld, 2003. "Remedies for Price Overcharges: The Deadweight Loss of Coupons and Discounts," NBER Working Papers 10162, National Bureau of Economic Research, Inc.
- D18 - Microeconomics - - Household Behavior - - - Consumer Protection
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Severin Borenstein, 1995.
"Settling for Coupons: Discount Contracts as Compensation and Punishment in Antitrust Lawsuits,"
NBER Working Papers
5085, National Bureau of Economic Research, Inc.
- Borenstein, Severin, 1996. "Settling for Coupons: Discount Contracts as Compensation and Punishment in Antitrust Lawsuits," Journal of Law and Economics, University of Chicago Press, vol. 39(2), pages 379-404, October.
- A. Mitchell Polinsky & Daniel L. Rubinfeld, 2005.
"A Damage-Revelation Rationale for Coupon Remedies,"
04-009, Stanford Institute for Economic Policy Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If references are entirely missing, you can add them using this form.